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Downing Co. produces and sells synthetic string for tennisrackets. The following transactions were completed by DowningCo., whose fiscal year is the calendar year:2002July 1. Issued $20,000,000 of 5-year,14% callable bonds dated July 1, 2002, at an effective rate of 12%,receiving cash of $21,472,126. Interest is payablesemiannually on December 31 and June 30.Dec 31. Paid the semiannual interest on the bonds. 31. Recordedbond premium amortization of $147,213, which was determined byusing the straight-line method. 31. Closed theinterest expense account.2003June 30. Paid the semiannual interest on thebonds.Dec. 31. Paid the semiannual interest on thebonds. 31. Recordedbond premium amortization of $294,425, which was determined byusing the straight-line method. 31. Closedthe interest expense account.2004July 1. Recorded the redemptionof the bonds, which were called at 102. The balance in thebond premium account is $883,275 after the payment of interest andamortization of premium have been recorded. (Record theredemption only.)
INSTRUCTIONS:
1. Journalize the entries to record the foregoingtransactions.2. Indicate the amount of the interest expense in (a)2002 and (b) 2003.3. Determine the carrying amount of the bonds as ofDecember 31, 2003.
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